Treasuries extended last week’s selloff driven by fiscal stimulus optimism, keeping the benchmark 10-year note’s yield above the long-elusive 1% level for the fourth straight day.
Long-term yields in the world’s biggest debt market are settling into a new, higher range above the tough-to-crack perch set in March as traders bet President-elect Joe Biden, who takes office next week, will push for quick passage of more economic help. This comes as traders’ outlook for inflation hovers near a two-year high.
“The trend in yields will continue higher,” Jim Bianco, president and founder of Bianco Research, said on Bloomberg TV. “Yields are probably justified given probably the $400 billion-plus stimulus that is going to come with a $2,000 check — with an infrastructure bill that’s coming after that and probably more stimulus down the road. More stimulus means more supply, and it means a higher chance of inflation.”
A rebound in share prices from their lows of the day also renewed the tailwind pushing yields up since last week’s Senate elections in Georgia gave Democrats control of Congress. A key measure of the U.S. yield curve — the gap between 2- and 10-year yields — expanded Monday to almost 100 basis points, a level it hasn’t reached since May 2017.
Pressure for higher long-term yields is also coming as the Treasury Department is set to sell $38 billion of 10-year notes and $24 billion of 30-year debt this week, matching records for reopenings of the maturities. First thing, though, the department will also offer a record $58 billion of three-year notes on Monday.
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